Sterling and Wilson Renewable Energy (NSE:SWSOLAR) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Sterling and Wilson Renewable Energy Limited Q2 FY 'twenty seven Earnings Conference Call. This conference call may contain forward looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as of date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. Today on this call, we have mister CK Thakur, global CEO mister Ajay Prathap Singh, CFO from Sterling and Wilson Renewable Energy Limited and SGA who are their I p... IR partners.

0:53 I now hand the conference over to Mr. Sikhi Thakur. Thank you, and over to you, Mr. Thakur. Thank you, and good morning, everyone. Thank you for joining us to discuss the results for the second quarter's first half of fiscal twenty twenty seven. As we flagged on our last call, the first half of this year turned into a transition period. Our ongoing projects are in their final stages, while eight new projects, four in India and four overseas, we are moving through LOA and notice to proceed. I'll begin with where the industry stands today because it shapes both our opportunities and our discipline. I'll then cover our operating performance and outlook and Ajith, our CFO, will take you through the financial updates.

1:42 So I'll just touch upon the industry overview. India's renewable energy journey continues at an extraordinary pace. Renewable and large hydro capacity stood at about three zero eight gigawatts as of September 26, roughly 53% of the country's total generating capacity. Solar remains the engine of this growth. Installed solar capacity has grown from under three gigawatt in 2014 to about 171 gigawatt today. Calendar 2026 is on track to be the strong year for solar capacity addition in India. India added about 34 gigawatts DC in first half of this year, 38% more than a year earlier, and full year additions are expected to be in the range of 50 gigawatts DC as of the record 49 gigawatts set in 2025.

2:40 That said, the near term has been more challenging. Two factors showed new utility scale awards in the first half of the year. A third factor competition has influenced how we beat. First, the shift to domestic solar sales. Since June 2026, projects must use modules made with Indian sales as per ALM-two. India has over 200 gigawatts of module capacity, but about only 35 gigawatts of cell capacity. So compliant modules are scarce and costly, may raise project cost by around 15% to 17%. As a result, developers are reworking project economics and tariffs and many have delayed EPC awards until prices and economics settle.

3:30 We see this as a temporary phase. Cell capacity is expected to reach about 100 gigawatts by December 2027, which should ease prices and restore award activities. In the long run, it will give India a stronger and more secure supply chain. Second, delay in power purchase agreements and transmission constraints. About 40 to 50 gigawatts of awarded renewables capacity is still awaiting for signed power purchase agreements. Solar output is also being curtailed at times in Rajasthan and in some parts of Western India because of grid limitations. As a result, projects pipelines in Rajasthan and Gujarat have been pushed out of several quarters.

4:22 Third, the competitive landscapes. Competitive landscapes has affected how we win the projects. Entry barriers in reverse auctions are low and some new players have bid at prices we believe are tough to maintain margins and may not be sustainable. We have been very much cautious and selective in such bids and hence our own order wins in domestic markets have been lower. We saw similar cycles in 2011 and around 2015, 2016 and disciplined experienced players came out stronger each time. The government is now acting firmly on some of the issues related to transmission bottleneck.

5:09 On 09/30/2026, the cabinet approved Green Energy Corridor Phase III with an outlay of around INR 1.86 lakh crore. This includes about INR 1.36 lakh crore from the state transmission networks with central support of around INR 54,000 crore. It aims to connect up to 135 gigawatt of renewable energy to the grid by financial year 2033. In addition, on 10/06/2026, the Ministry of Power issued new rules to pay landowners market rates for the land used by the transmission lines. This should reduce disputes and speed up construction.

5:56 These measures will take time to deliver, but they directly address the transmission bottleneck that is holding back PPAs and new hours. Of course, the blue side of this circular has to be seen once the high the land cost will come into play. Battery energy storage systems. Battery storage in India has moved from pilot projects to large scale deployment. India added about 8.2 gigawatt hours of battery storage in the first half of twenty twenty six compared with less than 100 megawatt hours a year earlier. Almost all of this came from large stand alone projects.

6:41 Rajasthan and Gujarat, two of our core markets account for over half of installed capacities. The outlook is also robust. Cresyl expects 45 to 50 gigawatt hours to be commissioned in financial year twenty twenty seven and financial year twenty twenty eight alone. Projects with storage made up nearly 40% of renewable capacity auctioned in financial year twenty six, up from about 5% earlier. The Central Electricity Authority expects two thirty six gigawatt hours by financial year 2032. The government also plans to require storage of new solar and wind projects from July 2027. We expect most large solar tenders to include storage going forward.

7:33 We are actively monitoring the best opportunities and are selective in bidding new best projects. Battery prices have risen in 2026 after years of decline. The domestic battery supply chain is still developing and customers increasingly expect long performance warranties from EPC contractors. Now coming to operating performance for Q2 financial year 2027. Revenue was $15.27 crores in Q2 and INR 3,118 crores in the first half, about 11% lower than H1 FY 'twenty six. This decline is primarily from our international businesses.

8:20 International's revenue was INR165 crore in the first half compared with INR929 crore last year. Our four older international projects in South Africa, Spain and Italy were completed and the new ones are at restart. Meanwhile, our domestic businesses grew. Domestic EPC revenue in H1 FY 'twenty seven rose about 13% to INR2768 crores and O and M revenues in H1 rose 48% to 183 crores. The lower revenue therefore reflects the timing of international project execution. Right projects in our order books, four in India and four overseas are yet to start.

9:10 Since contract time lines start only from LOA to NTP, these delays do not expose us to potential to penalties or bank guarantee risks. As of 09/30/2026, our order book stood at INR 12,481 crores, about 34% higher than a year ago and up from INR 11,813 crores in March to 0.26 to 0.27. The order book is diversified and well balanced with about 56% from India that is 6,943 crores and 44% from international market, that is INR 5,538 crores.

9:57 We own orders worth INR 3,626 crores in the first half, nearly 90% of them international. This was a deliberate choice. When domestic awards slowed down and pricing became aggressive, we avoided low margin bids and focused on international markets where we are winning at healthy margins. However, in international market, we are very selective in terms of geography and are actively pursuing only in certain countries where we have a strong track record, executions bandwidth and right partners. Q2 financial year twenty twenty seven order wins and pipelines. In Q2, we own two orders worth over INR985 crores including taxes as announced in September 2026.

10:51 We own a five thirty four megawatt project in Rajasthan. It's a balance of systems order from leading Indian ITT who is a new customer for us. We own a six sixteen megawatt project in South Africa. It constitutes two battery storage projects of three zero eight megawatt each on a turnkey basis from a leading Middle East, best developers and repeat customer. This is our second largest utility scale battery projects we have received the LOA. These wins add to the contract we signed in June 2026 for the Westminia projects in Egypt. This is a 1,000 megawatt AC solar plant with 600 megawatt hour surface storage, worth about $560,000,000 which will execute through our fifty-fifty joint ventures with Hassan Alam construction.

11:49 We expect it to start contributing to revenue this year. Our work orders our work under the five year framework agreement with the Arani Groups also continues as planned. Our floating solar projects at Pillaiya in Jharkhand, one of the largest in India for the NTPCDVC joint venture is nearing completion. Our evacuation will begin once the real estate transmission line is ready. This experience positions us well for upcoming floating solar tenders from NTPCDVC and DVC alone and several state governments. Looking ahead, our solar grid pipeline, excluding battery storage, has grown to 34 gigawatt from 27.7 gigawatt last quarter.

12:39 About 74% of this is in India and 26% overseas. Battery storage bids are in addition to this. We see bidding opportunities worth about INR45000 to INR50000 crores across solar and storage in the second half of this year. Now coming to projects from Reliance Group. Our work with our promoters, the Reliance Group continues to deepen as Reliance has publicly announced its building one of the world's largest integrated renewable energy hubs in Kutch, Gujarat, combining solar power with battery storage at very large scale. We are working closely with Reliance on technical design and education readiness. International business.

13:27 Our international business is now on a strong footing. We recently completed four projects in South Africa, Spain and Italy, giving robust margins. Our international order book now stands at INR 5,538 crores across Egypt and South Africa. Execution starts in the second half and international revenue is expected to rise significantly in H2. Now coming to our Professional and Maintenance business. Our O and M business continues to grow strongly. Our portfolio has reached a record 18.9 gigawatt, up from 13.5 gigawatts in March.

14:14 O and M revenue grew about 55% to INR99 crore in Q2 and 48% to INR193 crores in the first half. This business gives us a steady recurring income with low overheads. Outlook for FY 'twenty seven. We are maintaining our guidance of up to 10% revenue growth for FY 2027. We are confident for three reasons. First, eight projects in India and overseas will move into execution in the second half. Second, execution will commence on our international order book of over INR 5,500 crores with the West India projects in Egypt as the key contributors.

15:04 Third, we have done this before. In Q4 FY twenty twenty five, we delivered revenue of over 2,500 crores in a single quarter. We expect Q3 to be clearly better than the first half and Q4 to be our stronger quarters. We expect EPC gross margin of 8% to 10% depending on the mix of turnkey and balance of system projects and O and M gross margins of around 20%. We expect our order book to remain above INR 10,000 crores at the end of financial year 2027. We believe success in this business is not just about winning orders, It is about completing projects without negative surprises.

15:50 As the industry consolidates, we believe this discipline will set us apart. With that, I will hand over to Ajith for the financial performance. Ajith, over to you please. Thank you, Sikh Keri sir, and good morning everyone. Revenue from operations for Q2 FY twenty twenty seven was INR1527 crore compared with INR $17.49 crore in Q2 FY twenty twenty six and INR $15.90 crore in Q1 FY twenty twenty seven. Domestic EPC contributed INR $13.66 crore, international EPC, INR 62 crore and O and M INR 99 crore.

16:37 First half revenue was INR 3,118 crore compared with INR 3,510 crore last year. As CK Disar explained, the decline was predominantly due to lower international revenue as older projects were towards flag end of completion and new ones are yet to start. Domestic EPC revenue grew about 13% in the first half and O and M revenue grew about 55 in Q2. Gross profit for the quarter was INR140 crore. Gross margin improved to 9.2% from 8.9% in Q2 FY 'twenty six. For the first half, gross margin was about 9.5%. We expect EPC gross margin of 8% to 10% depending on the project mix.

17:27 Turnkey projects have lower percentage margins, but higher absolute profits, while balance of system projects and better gross margin, O and M gross margin was about 23% this quarter, and we expect it to settle at around 20%. Operational EBITDA, which is gross profit minus recurring overheads, was INR 56 crore, a margin of 3.7%. This compares with INR 62 crore at 3.5% in Q2 FY 'twenty six. Recurring overheads were INR 84 crore, about 11% lower than INR 94 crore a year ago. Reported EBITDA, including other income, was INR 66 crore compared with INR 96 crore in Q1.

18:16 Profit before tax and profit after tax were both INR 17 crore compared with a loss of INR478 crore in Q2 FY 'twenty six and a profit of INR53 crore in Q1. First half profit after tax was INR70 crore compared with a loss of INR $4.39 crore in H1 FY twenty twenty six. It is worth noting that the loss in the previous year was primarily attributable to a onetime impact arising from The U. S. Arbitration outcome and related provisions. On an operating basis, first half operational EBITDA was INR134 crore compared with INR184 crore last year because of lower international revenue this year.

19:04 Our recurring overheads have stayed within INR 79 crores to 84 crores a quarter. Most of the people we have added work on specific projects and their costs are included in project budgets. As revenue grows in second half, overheads as a percentage of revenue should fall and operational EBITDA margin should improve. Now coming to balance sheet and working capital. We continue to operate with negative working capital. Net working capital was negative by INR $30.01 crore as at 09/30/2026 compared with negative INR $2.60 crore at the end of Q1 and negative INR $3.29 crore in March. Receivables, including unbilled revenue stood at INR 3,005 crore.

19:52 Receivables days increased to INR 176 crore from INR 138 crore in March and payable days increased to INR 164 crore from INR 135 crore. Gross borrowings fell by INR $2.44 crore in the first half to INR $9.20 crore as we repaid term loans as scheduled. With cash and bank balances of INR $3.19 crore, net debt was INR $60.01 crore, broadly unchanged from INR $5.89 crore in March. Shareholders' equity rose to INR $7.19 crore from INR $6.51 crore. Most of our existing term loans will be repaid over this year and next year. Our banking relationships continue to remain strong. We have secured over INR 3,000 crore of new credit lines, including local lines in South Africa during the current year.

20:44 And our lenders continue to support as we win orders. On claims and indemnity, we also continue to make steady progress on legacy claims. We have signed a settlement with a Chile customer. Part of the amount is expected to be paid by the customer once their transaction completes and the balance will be claimed from the promoters in the next cycle. We expect to receive around INR 156 crore under indemnity in the current year from the promoters. To sum up, the first half was a transition period for our international business, while domestic EPC and O and M continued to grow. We are well placed for a strong second half with an order book of nearly 12,500 crores, eight projects moving into execution, a growing Wyndham business.

21:38 With that, we can open the floor for questions. Thank you. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on your touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. The first question comes from the line of Sameer Dalal with NaturLal and SunStop Broker. Please go ahead. Yes.

22:24 Good morning. So honestly, not very impressive results, and I wanted to ask you this question upfront. You know, we keep talking of the fact that we have a very strong order book, but the execution for whatever reason, it may not be your problem, and maybe the customer is not able to get the land or the the... Whatever he's supposed to do. But it keeps getting delayed. And because of which, what's happening is our profitability is getting affected. I know you've maintained your 10% top line growth for the current year, which is what you had initially said. But what is the reason for these delays? Are we going to constantly have this? And then, you know, by the end of third quarter, we say, no. Now we may not be able to achieve the number because that sends projections off track. That sends our expectations off track.

23:10 So what exactly is the problem? Why are the new projects which you said before in India and before in international market not starting? What has been the delay for that? Yes. Thanks, Sameer. If you look at EUV positions at hand at the start of the year, we had pretty robust order books in hand. Having said that, there were three projects, one large size project from Coal India that we announced and two projects for NTPC. Normally, when the projects are being announced in the Q4 or Q1 of the following years, around 70% of the revenues you consider in the following years.

23:59 That means your contributions from the loop before new orders could have been much larger, right? Unfortunately, the Coal India and the two NTPC projects, because of the PPAs not being signed with the utilities, the final NTP did not come to us, which we expected that the execution of these projects could have been started in the, let's say, mid of the Q2. That's the reason was. The four projects in international market, so that NTP was supposed to be somewhere around, let's say, August. And so there for two projects, we were expecting the major revenue to of course come from Q3 and Q4 and some revenue in Q2.

24:52 So those NTP also were delayed because of their financing arrangements and other things. Fortunately, one large size order which have come from Egypt, Romania, they are the short gas stations project and the project is moving, the NDP has come and the work has started. So with this, historically, if you look at our performance in the last financial year also, I mean, with respect to that, we are at the right pace. But yes, so I do agree with you with the large orders in hand. Yes. So I was just telling that had these new projects been started sometimes in the middle of the quarter two, year could have been better. But having said this delay, in the Q1 results, I have already given the guidance that probably Q2 will not be as promising. It will be in the range on the Q1 only. And we are here. We are here and we are in the range of Q1 only. So going forward, I'm pretty sure that, I mean, the international revenue will be keep on adding. Domestic four projects may take some time, another maybe one to two months, but the substantial revenue from the new projects, PSU projects will come in Q4.

26:14 Okay. The second question comes on costing. One thing that we have noticed is that the cost is continually moving up. Now we had talked about the fact that we can maintain our cost at the current level. And as the top line grows, the operating leverage will play out at the... I mean, this is at the central office, right, at the head... Headquarter. But we're seeing that this is continually rising. Now where do you see it stabilizing for FY twenty seven and FY twenty eight from $303.20 crores that you are due? Where do you see it going over the next maybe two years? So I think if you see that recurring overheads, if you're talking about that, then the cost is almost flat. There is not significant movement on either side, neither lower nor higher.

27:04 As a percentage of revenue because the revenue was lower in the current quarter and in the last quarter also. So as a percentage of revenue, it looks high. It was around 5.5%. And the moment revenue will increase, this cost will remain same, and we expect it to be in the range of around 4.5 for the current year. Fair enough. But no, once you said that you're waiting for the Reliance orders, so my question is once the Reliance orders come in, would you need to hire a lot more people at the offices? Would that push the cost up? And of course, the question that eventually lies is by when do we expect Reliance to actually give the orders which we can start executing? So majority of the cost will be at the site. It should be part of direct cost from the Reliance orders also. There will not be any significant increase in overhead cost.

27:55 And if you can just give us a particular date, I think, then that's the last question I have. Then... No. So basically, we discussed last time also. So from the overhead side, I mean, the implied cost and all and the other expenses is only part of the project cost, which will be part of the overall project cost. So to that extent, some addition will be there at head office, but proportionately, it will not increase our burden because the revenue also will be coming. On the when the project will come, I'll maintain the same status because the site readiness work is going on. And post monsoon, the work is supposed to be started. So it is on just on to the final leg of the finalization of some of the technologies on the tracking side and all. So I'm not in a position to give you much details. But I can tell you that now this is almost at the side end of the I mean the planning process and the work you can see the I mean some good news you will I mean hear out soon. That's what I can tell you at this stage.

28:59 Okay. Okay. Thank you very much. Thank you. Next question comes from the line of Disha from Saphil Capital. Please go ahead. Yes. Yeah. Okay. So a couple of questions. Firstly, so we've still maintained our growth guidance at around percent. So that would that would mean that we need around a 2,600 sort of quarterly run rate for the next two quarters. So first question being, do we see any risk in execution for us to achieve these targets? And how are you looking at execution for Q3 and Q4? Like, what numbers are we targeting? Because that will give us better clarity. Madam, so based on to our guidance, we still maintain up to 10% growth in the revenue this financial year.

29:51 I've already told earlier the first the Q1 was little subdued Q2 also because of various factors, nonmoving, PPA adaptions, all those factors have affected new projects not to get started. But Q3 and Q4, because the international projects have already taken off. So I'm expecting the traction to increase more. So for sure, the Q3 and Q4 will not be in the proportion of INR 2,600 crores, but Q3 will be better than Q2, and the Q4 will be heavily loaded. And so we don't see any risks to the renegotiation, right? No. So basically, we are pretty confident of our ability to execute the projects. Why it has impacted you basically some of the projects have not started. So our team is in place. We understand everything. So everything has been all planned. So now since the project has been launched and there is a definite time line. So from the international project, the revenue has to increase. I'm expecting the four stalled projects in India and few ITB projects in between that they have come, are on track.

30:55 All the ongoing projects, all projects are on track. None of the projects is getting delayed because of our ability to not execute the projects. So what I say that, I mean, out of the four projects in India and few more projects, if they come and they are at a faster track, they should be contributing towards the quarter four. So unfortunately, this is not only with us, the entire EPC community and the whole industry, India, Indian industry in the solar sectors have been impacted because of the reasons. The reasons, two reasons, one that I have told you in my opening remarks also that the settlement in Rajasthan and Gujarat that have slowed down the order inflow from the IPPs and even for the PSU. The requirement of our obligation of the BEST systems to be installed, The best is now mandated to be with the domestic Indian mix kind of things, but we don't have the sales production capacity with this mismatch and understanding people are quoting, I mean, any crazy prices because orders you must have seen, they have been all terminated, right? The contractors could not execute this out.

32:06 So the developers are also becoming very careful that, I mean, you can have the wish list for a number of things, but the Indian industry is in our support. So although the pipeline, the requirement, the development plan is already in place, but on overall execution sites, all these technologies and other things are taking time, which is not specific to Sterling will sell alone, but it is specific to the industries. Right. And sir, for this international ED projects, do we see a major margin differential between the domestic and the international projects? And if so, what is the retention? So domestic market margin is always under pressure from the fact that in all the SOLAR and the best projects, there is no entry barrier, right? So anybody and the outside some of the business infrastructure projects also just feel that SOLAR being vanilla projects, they can earn a lot of money.

33:03 And without understanding the efficacies of technologies, the supply chain disruptions and all they are entering into the market and they are quoting any price, right? And therefore, we have seen that despite the fact that I mean good amount of contracts have been finalized in H1, but none of the government changes we are there because it has gone below the you see from our appetite point of view, it has gone below the cost, right? And then people have taken. God knows how they are going to execute, but we have been keeping away from also kind of decisions. What I said at India, this kind of entry barrier problems and all and not much opportunity in the other sectors being seen, people are coming and jumping left, right, right? So that's not created the margin. Of course, for us also, I mean, we have to sustain. Therefore, the margin that we expected, right, in the domestic market would be going down because you have to take a business all and you have to survive. So but not to the extent that, I mean, people are doing. Then strategically, you have to move from domestic to international market. And therefore, you could see that despite the fact that we thought that this year, it will be around seventy-thirty, domestic and international, but we are even more.

34:10 We have to exclude towards international. Why international margin is more? Because the market is stable. People understand all those things. It's a healthy competition. And with healthy competitions and overall turnkey projects in terms of percentage, even if it is slightly lower, I mean, per the Indian old condition, but since it's a country projects, our absolute number will be more than the domestic margins. So therefore, the contribution will be much more. Okay. So as the execution of this change up in the second can we expect for this entire EBITDA margins to be in the range of 4%, 4.5%? Yes. Yes. I think that's a minimum requirement that we have to maintain, right?

34:55 Yes. Okay. As of what was this ONM revenue that we expected for this entire year? In the percent, in the range of 20%. Internal No revenue, are asking. No revenue. Revenue. Okay. Sorry. ONM revenue, we expect in the current year should be more than INR 400 crores. Okay. Okay. And sir, this project that you mentioned that we're we're starting to extend revenues for this... From this year itself, by when exactly do we expect this revenue to come in by q three or be more skewed towards q four? And what sort of amount are we trying to book for this year or for the next year? And what is the project and what are the margins for this project? So the Binya project is the project is for, let's say, around fourteen months, right? And the NTP has started.

35:47 So let's say, 40% of the time to go for this financial year in the similar proportions to Q4 would be heavily loaded for the supply to commerce. So I'm expecting that, I mean, good margin to come from these projects. And Q1 and Q2 next financial would be the completion dates. So that's the reason that I say that the Q3, Q4 of this financial because of many are definitely will be loaded. Our margin is a pretty good margin. So we are around on the overall turnkey ramp, it is more than 8%. Thank you. Mr. Desha, please rejoin the queue for more questions. Next question comes from the line of Faisal Hawa with H. G. Y. And Co. Please go ahead.

36:41 So, sir, when do we see the overall banking situation coming back to normal where we can issue a BD that will... And we... Our credit rating also improving? That's one. And second question is, sir, how much orders can we expect from Ambani Reliance Industries in the coming financial year and also from Adani Enterprises in the coming financial year for Kowda? So I will come for the order positions and then Ajith will address your the banking position. So as you are aware that the we have into the framework arrangement with Adani for five years. So first year was around 1.2 gigawatt and the RFQ for the next 1.2 gigawatt has already come to us, therefore, yesterday.

37:32 And we are expecting that this order as per the framework arrangements should be getting closed soon, right, maybe this month or maybe next month, right? So that is on to the Adani side. Reliance side, it's premature to tell you that how much order will come, but we believe we would be the very and then for their the preferred CPC partners and we are expecting the large number of order to come through us. But unless it comes to us, I can't commit you, right? But then, yes, it's going to start soon. On the banking side, Harjit, if you can just... Yes. So on the credit line side, last year, we have added from the banking system around INR 1,800 crore new credit lines. And in the current year, we have added till now around INR 2,800 crore new credit lines.

38:28 And so basically put together, if you see last year and current year, we have added around INR 4,600 crore new credit lines from banking system and over and above more than INR 700 crore from surety bonds also we got. So we are sitting on pretty good position in terms of our working capital requirement for non fund based limits, banking bankers are supporting. In the current year, we got three new sanctions from Indian banks and one new sanction in South Africa from a South African bank for Egypt project. So we are pretty much on very comfortable position in terms of our bank guarantee requirement and LCs requirement. Our current utilization of the credit lines is around 70%. So that gives a lot of comfort to manage bank guarantees and LCs.

39:16 In terms of cost and credit rating, credit rating is under renewal as of now. But since last year, we have taken that write off, so we could not get the credit rating upgrade earlier. And the moment we'll probably have reliance orders or any other large positive news, definitely we'll go back to the rating agencies for review of the rating. And sir, you did talk about the competition underbidding in most of the solar projects. So do you see this competition now weakening and overall their financial situation not being so good that they may not be able to or or they may be blacklisted by many agencies.

40:04 They may not be able to participate in many more contracts and overall the competitive intense... Intensity going down? Or you feel that more such players will come in now? No. So for sure, so I am we are waiting for the consolidation to happen. What is happening now, the financial qualification requirement for all such solar projects is not very stringent. Now what we see the trend getting reversed is that for all from all the PSU companies, the large sized project orders that are coming, they are coming with the modules. And therefore, the project cost is in the high range. There I'm expecting that the small players will not be competing, right? And then we will have a better opportunity to get into. So that would be the kind of scenario in maybe the Q3 and Q4, the next and huge pipeline that I have already told is projected.

40:59 So the consolidation for sure will happen. On the existing orders that they are bagging, you must be tracking the news in the market. Few of them have been already terminated. Few mean, these orders that they had backed, right, at the I mean, we'll say, 50% discounted price from the battery cost. And the battery cost was, let's say, around $75.80 dollars per kilowatt hours, their tender price was around $45 right? And then it was a non moving kind of orders. And therefore, I mean, the order was terminated. There are few orders which have been again getting annulled because the even despite the fact that they have taken at a low price, but it still is not coming for the hybrid tariff appetite for the developers.

41:47 And therefore, some of the new schemes are being launched to import under the more schemes and then you see that if you get the custom benefits, so that the hybrid tariff price will come under these things. So all those things are frankly speaking, disturbing the best market and all those things. So I think all these consolidation for sure it will happen, but this fiscal will probably continue like this in my opinion. But the consolidation has to happen. Otherwise, it will be a serious problem for the industry. Government is working on this. As I have already told that for the green corridors, the government has taken a lot of actions on the West West Side to sell productions, if not in maybe Q3, but I mean Q3, Q4, but the Q1 of the next financial, many large players are doing. Then I can and then the domestic cell capacity in the module side, they are increasing. So now it is at 35 gigawatt, it may reach up to 100 byte these things. That would be the time when I say that the price level also will get consolidated, the government policies versus the actual requirement will all be getting settled.

42:51 And then that would be the time where I think you can see that the things should be in the right directions. But in such times, because of the some of the industries, paralysis, I will say, some of the policies, which have to be implemented, but the industry is not ready, all those things have impacted everybody's. I mean, few of them switch, they can keep on adding because of the IPO, they are just waiting for, but we are not into the race. And therefore, not that only we are fortunately, I will say that we had a very healthy order positions as in 04/01/2027, right? So I'm sorry, 2026. So for this financial year, at least despite the fact that there are many ups and downs, but we will be around the guidance that are given to the market.

43:41 So is it now time that we forget about the Nigeria order? I will not say to forget about this, but yes, it is still cold because now election is going to happen and all those kind of things. So I mean, the last update was that it was to be taken by the finance industry, but if you know this how this African country work. But then the big new moment coming and all and the tariff wars, I mean, every new day you take the news from our honorable U. S. President, right, say, every country, they are all how they are affected. So this was exempted from U. S. So I mean, the project is still on, right? We are pursuing this. But I mean I can't commit to the time line at this moment for this project.

44:32 Thank you. Mr. Havar, please rejoin the queue for more questions. Next question comes from the line of Jayesh Shah of with Kask Capital. Please go ahead. Yes. Hi. Thanks for taking my questions. Yes. My first question is, actually, if I'm not wrong, last quarter, we downgraded our guidance from 15% to between 10% to 15%. And this quarter, we are saying it is up to 10%. So it is actually a downgrade of guidance rather than maintaining your guidance. So I'm surprised why management is saying that you're maintaining the guidance. And secondly, when you talk of up to 10%, it is between 0% to 10%. So can you be a little more specific in terms of what does up to 10% mean?

45:28 My second question is, so it's a small point, but why has our finance expenses increased this quarter in spite of slower execution? No. Second question, please repeat again. I'm sorry, I could not. Second question, can you repeat please? Yes. So why has our interest in finance cost increased this quarter in spite of lower execution compared to Q1? Okay. So on your revenue guidance, I've already explained the overall industry scenarios, right? So the way the last year, the last fiscal market was pretty stable because that means the sales were imported from Chinese, Chinese sales were there and everybody was up and running. So everything went well. Suddenly the implication of ALM-two came and your mismatch between the module, I mean the cell capacity in India and the plant that is being executed.

46:36 On the best side, the obligation of the best installation came that was during the fact end of the last fiscal. And still being not manufactured, still people are waiting, I mean, the market to get stabilized. Now, say India make, but then everything is coming from, I mean, the outside India, mostly from China. We have a land border close that also I mean impacting. So with all those things and then the developers is looking for the stringent guarantee and warranty condition. So overall if you see in the renewable sectors other than maybe the wind, I mean this kind of the imbalances are happening and that has impacted not I mean primarily to the developers for their programs to be launched as they thought of and then of course the EPC company that have to follow them. So to that extent market is uncertain.

47:26 What I say that all the projects that we have in our hand that they were contributing let's say four projects, four new projects they are still not start they have not started. My expectation by that out of the four projects which we are already around 40% of our total order in hand as of 04/01/2026. So, there are no reason that I could have not gone up to the 15%. Now this is the project in Q2 also they have not started because of the I mean, the NTP not coming in. So, therefore, I'm not changing. Maybe the support will come from the international projects, maybe quite possible. But at this stage, what I say that, I mean, since the projects have not started, possibility that we should be able to maintain around 10% of the revenue growth.

48:17 So it's actually a downgrade of guidance from 10% to 15% to 10%? So 10%, I mean, our range was 10% to 15%. I still see the 10%. It is not 0%. I thought between 01%. It will be around 10%. Okay. And this is ex reliance, if I understood? For sure. For sure, yes, ex reliance. And on the interest side? Yes, in terms of finance cost, the cost has increased primarily for two reasons. As I mentioned, we have availed some new credit lines during this year. So cost for that. And also the LC cost, we are now opening the LC for a little longer period, so that additional period for LCR is factored as interest cost. So that has led to our increase in interest cost. Although our gross borrowing if you see that is on reduction cycle and we have reduced our gross borrowing. Although in terms of net debt, there is not much change. It's almost a steady level because our cash balance has come down.

49:24 Just one last thing. I know a lot of questions have been asked on the Reliance order. I think Mr. Thakur talked of it being very imminent. So and Reliance also in its last one call talked of starting the project post monsoon. So do you think that post this geo IPO, we can see something from November onwards in terms of execution? At least will there be some execution in this quarter? I don't think that the Jio IPO has any link with this. But in this quarter the commencement of course is expected. So I say that the readiness for overall technology to be integrated in these teams is at the final end. So, you know how the reliance was basically, so every single bit of decision has been taken very carefully to ensure that the ROI on the investment comes, I mean, more than the industry expectation.

50:31 So, see the same for everybody that why it is taking times, but as per their announcement and their commitment that this financial year, they will commit on something, right. We have seen these annual statements. So they are committed to commission something, right. So keeping all those things in mind, so we are also expecting the order to start coming soon. Things will happen now, this quarter for sure. You. Mr. Sherof, please rejoin the queue for more questions. Next question comes from the line of Nilesh Doshi with Prosperity AMC. Please go ahead.

51:20 Hello. Am I audible, sir? Very good. Very fine. Thank you. Thank you, sir, for the opportunity. I have two questions. One is related to the O and M business. Sir, we have a O and M portfolio of 18.9 gigawatt. I would like to understand that is the complete portfolio is under the fees model or we have some obligation pertaining to the EPC project or EPC obligation? And what is the O and M chart per megawatt for the domestic as well as the international project? And we are mentioning that our GP, but GP guidance for the O and M project is 20%. It means the O and M are really raw material intensive or labor intensive because there will be some that... So naturally, the GP is only 20%. The EBITDA or EBIT margin may be much more lower than that margin.

52:14 And so last question, do the company receive the O and M charges upfront? And how do we recognize the revenue every quarter? And what is the minimum period of O and M contract, sir? These are all questions related to the O and M only, sir. Okay. So great. So basically to your first question, so our mix of the order book in O and M is now almost 5050%. So when you say 18 hot gigawatts, so 50% is to our own EPC. I mean, so we have the EPC contract. We signed a contract with two years or three years of O and M contract. And around 50% is from third party. Third party means our O and M business, they get the O and M contract from the other OEMs, from the other developers, So having said that, so this is in mix of the order proportions.

53:18 The O and L business is of course labor intensive. It's not basically raw material intensive. So we have to maintain certain spares that is sometimes the high cost spares are being provided by the customers and some consumables and other things we have to maintain. On the costing of the O and M per megawatt, I think it will not be proper to, I mean, reveal this fact here in this call. But just for you to give you to understand that this is all basically depending upon the scope. So basically, they are all basically depends on the scope. So scope means somewhere we have the transmission line, somewhere we have the substation, somewhere we have other things. I mean, and then robotic cleanings, semi robotic cleanings, manual cleanings, the water cleanings, all those things depends on the various the pricing mechanics.

54:16 And with this, internationals being slightly better. So of course, we got our margin appetite, into mistake, as told you, is almost 35% to 40% higher than the domestic market margins, right? So there's no upside risk in the O and M business, right? Except for sometimes there are certain obligations on the warranty and all, but they sometimes impact very minimally, not to the extent that basically the EPC business is sometimes getting impacted. And one of the question you raised on this overheads, in O and M overheads are very minimal. Very minimal, yes. Gross margin generally will convert to EBITDA with very minimal change. So it means the labor cost is a part of the GP margin because you are considering the after this.

55:04 Okay, sir. And once the EPT project is completed, O and M contract start and we are charging extra, not the it is the including of the EPC cost. It is separate and we are charging for each and every megawatt we are doing the O and M work. Yes. So basically contract is basically as you are trying to understand it is let's say rupees per megawatt peak. The contract composition is like this, right? And then we have the DBO for the billings. So once the project is commissioned and handed over taking over is done, certain obligation during the DLP is there, but that is part of the EPC contract. If something goes wrong, then the EPC contract is affected, not the O and M contract. O and M contract is very clean. They have to only operate and maintain and they are mostly the manpower intensive contract.

55:56 So that's how this O and M contract is operated. Thank you. Mr. Doshi, please rejoin the queue for more questions. Next question comes from the line of Saurav Srivastava with Arista Consulting. Please go ahead. Sir, it's regarding the OEM only. First of all, are we also bidding for the OEM in international circuit? First first question. Second, is there any under bidding in the OEM in the domestic market also, sir? No. So the first question is, yes, we are bidding for international O and M business. And we have got one third party O and M business in Saudi Arabia last year. We are about to close few projects in the other geographies. I have not revealed the fact now, but yes, it is on the final stage.

56:42 So we have our international division for the O and M business as well. And your first part, we are so as I have told you that the business model is mixed from the own EPC versus third party. So third party EPCs because of our high credential in the O and M business. So I've seen that here, mean, you normally you are approached by the client for the performance of the O and M team that we have and the new spreads, right? So we don't see major challenge in, I mean, grabbing the orders. And that's how we have phenomenally, has grown from 11, 12 gigawatt to now 18.5 gigawatt. This year, I'm expecting another maybe I mean 25% of this by the year end I'm expecting it will go around 22, 25 gigawatt kind of things. So that's how it runs.

57:37 And sir, what kind of revenue mix do you see a couple of years down the line of this OEM business in the total business, sir? Or rather say the total net profit in the total bottom line, sir? Actually, it's not the right comparison because of the overall margin and this is a comparison. On whatever metrics do you feel like? How this is what sort of steady business, this is a steady business, I could say that now we are at around INR200 crores. We'll move up to INR400 crores, right, in the beginning of next year. And then 20% is the margin. So if you see that our project margins and then on 420%, let's say it comes to 80%, INR80 crores, right? So it will not be right to compare, but then we can understand that I mean on the business side of let's say INR 400 crores next year, every year if you increase minimum 10% to 15% and to that extent the margin also will go up, right. But it's not the right comparison to say that in overall margins will be what, because the cost our let's say your EPC cost is say INR 1.5 crore per megawatt peak, whereas the O and M cost comes to be, I mean, what I mean INR 1 lakh, INR 150,000 per megawatt peak something like depending upon the scope and all.

59:00 So it's a huge difference. It will not be the right company, but it will be the steady margins coming in from this office. Terms of net margin, yes, sir. Please, sir. Please. Sterling, in terms of revenue mix, as of now, it's around 5% of our revenue. We thought it may be in the 5%, it may increase to up to 10%. Because this will continuously increase and if EPC business remains stable, still O and M will continue to increase. The reason for asking this, lot of parts are coming in India also and people are developing and as you rightly said that people are underbidding, it will not be possible for many of them to continue. So there will be a lot of things open to you people going forward. That was that was the reason.

59:45 And then what sort of net margin do we settle down for the joint business roughly? Gross margin is around 20%. And as I mentioned, overheads are not much in this business. So that ultimately cost to the next number. Got it. And then my last question, sir, what sort of international geographies are we looking for, what will have done new geographies? So one that wherever we have the O and M project from our own EPC, for sure that geography is our target. Like we have we started from Africa. And Africa first project is doing very good. So the contract is also very unique. We have the bonus cost. So if we perform better, if we are the yield and generation becomes better then we get also the share of that profit ratio.

1:00:34 And year on year we have been getting fantastic bonus from these orders. So for Africa like we understand this market we have done the Zambia, Namibia, South Africa. Africa regions we are focused. Then we are now into Saudi Arabia. Saudi Arabia is a huge the capacity addition being happening, you will be knowing about. So at right times, have entered into this market. So gradually we'll expand. Now we are doing two own EPC projects, basically one in Spain and other in Italy. So that means we are open to the European markets as well, right? And we have experienced in Southeast Asia also, but primarily the reasons we are known and we have our presence that would be the primary basically the reasons for our choice.

1:01:25 Thank you. Sir, ladies and gentlemen, due to time constraints, that was the last question. With that, we conclude today's teleconference on behalf of Sterling and Wilson Renewable Energy Limited. That concludes this conference. Thank you for joining us. You may now disconnect your lines.